Reading the RSI Levels and Volatilities of Mining Companies

Many of the fluctuations in precious metals have been determined by the Federal Reserve’s interest rate stance. These variations play on precious metals funds.

Gold-based and silver-based funds such as the Physical Silver Shares ETF (SIVR) and the ETFS Physical Swiss Gold Shares ETF (SGOL) have seen their returns fall in the past few months. On a trailing-30-day basis, these two funds have fallen 8.1% and 3.8%, respectively, although they’ve risen year-to-date.

Let’s look at the implied volatilities of giant mining companies and their RSI (relative strength index) levels in the wake of the carnage in precious metals prices. We’ll look at GoldCorp (GG), Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Barrick Gold (ABX).

Call-implied volatility takes into account the changes in the price of an asset on variations in the price of its call option. During times of global and economic turbulence, volatility is higher than it is in a stagnant economy.

The volatilities of GoldCorp, Newmont, Agnico, and Barrick were 48.1%, 44.2%, 45.8%, and 47.3%, respectively, on October 18, 2016.

The RSIs (relative strength index) for each of these four mining giants fell due to their falling share prices. However, October 18 saw a revival in their RSI levels. GoldCorp, Newmont, Agnico, and Barrick saw RSI levels of 44.3, 46.2, 44.2, and 44.5, respectively. These miners account for a whopping 26% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

The trailing-30-day returns of these mining companies are negative due to the diminishing safe-haven appeal of precious metals. Most miners’ RSIs are trading close to 40.